Rental Property with hard money loans

[Todd Fullerlove]

Hello BP friends,

There are multiply arguments I hear when I talk to folks about using hard money loans for rental properties. Some seems to love them, others seems to believe a person is ridiculous for using them. Regardless of our opinions, we all can agree that hard money loans are an options to fund a deal. Weather or not its a good option is debatable. 

We just purchased a home for 13K in Oklahoma. That deal was a crazy ride and I'll write a blog about that later. After we purchased the property, we found out the neighbors are wanting to sell their house too. They bought a house for their kids to go to college and now they are graduated and they don't want to be landlords so they started a conversation with us.   

Our lender only wants to fund one deal at a time and we only have enough to fund one rehab. The neighbors house came out of the blue but just like any person who wants to be a millionaire investor, we have to take advantage of good opportunities. So BP world, what do y'all think about using a hard money lender for a rental property? Is there good, great or terrible experiences anyone would like to share?  
 

[Kyle J.]

Hard money can be a good way to ACQUIRE property, but it is not a good way to HOLD property. It's too expensive and most HML aren't long-term loans. That's why hard money is ideal for properties that are going to be fix and flips since with those you're usually in and out fairly quick.

With that being said, if you were going to use hard money to purchase a property that you knew you'd be holding as a long-term rental, you'd want to already have your exit strategy figured out. In other words, your long-term conventional refi already lined up. Especially if you're dealing with $13k properties because there aren't a lot of traditional lenders that lend on properties at that low of a price point. You'll definitely want to make sure you have a lender lined up that you know can refi you out of the HML before you ever get into it.